The financial performance of reseller-turned-software vendor Powerlan has again come under the scrutiny of the Australian Stock Exchange.
The ASX queried Powerlan in March over its large net negative cash flow and low cash reserves, as it does any company that, on paper, appears to be in danger of not being able to finance its own operations in the coming quarter.
Powerlan’s latest monthly report to the ASX for the period ended May 31 2003 has again raised concerns at the Stock Exchange. Revenues totalled some $2 million, but the company bled by around $1 million and only has just over $1 million left in cash reserves.
“It is possible to conclude on the basis of the information provided that if the company were to continue to expend cash at [this rate], the company may only have sufficient cash to fund its activities for less than one quarter,” said an ASX query sent to the company. Powerlan replied, almost word for word, as it had in March.
It claimed the negative net cash flow was “anticipated” due to “lumpy” revenue models and extraordinary payments made in relation to legacy debts.
The company claims that its cash flow is “distorted” in quarterly reports as its customer’s receipts are often paid on a quarterly or half-yearly basis. If necessary, it will resort to its chairman’s loan facility to “buffer future monthly cash flow lumpiness.”